by Not that affordability is relevant from the MMT POV, but it's worth looking at anyway. "They" view it conventionally in terms of the interest rate "r," that is, the policy rate, and the growth rate "g" measured as change in GDP.This is the ratio of r to g, or "r : g". As long as r is greater than g, "they" consider the increasing interest affordable. In fact, "r > g" has become a meme and entered the jargon since the publication of Thomas Piketty's Capital in the Twenty–First Century.While MMT regards this ratio is irrelevant to affordability for a currency sovereign, MMT economists also point out that that it is under the control of the central bank as the monetary policy authority that sets "r" as the policy rate. The central bank can set the policy rate where it chooses relative to
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Mike Norman considers the following as important: affordability, fiscal constraints, interest payments, public debt
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Not that affordability is relevant from the MMT POV, but it's worth looking at anyway. "They" view it conventionally in terms of the interest rate "r," that is, the policy rate, and the growth rate "g" measured as change in GDP.
This is the ratio of r to g, or "r : g". As long as r is greater than g, "they" consider the increasing interest affordable. In fact, "r > g" has become a meme and entered the jargon since the publication of Thomas Piketty's Capital in the Twenty–First Century.
While MMT regards this ratio is irrelevant to affordability for a currency sovereign, MMT economists also point out that that it is under the control of the central bank as the monetary policy authority that sets "r" as the policy rate. The central bank can set the policy rate where it chooses relative to its mandate of growth, employment and price stability ("inflation"), although price stability usually predominate, since central banks tend to target an inflation rate and use employment rate as a tool under NAIRU.
There are no bond vigilantes that control interest rates in a currency zone where the government is sovereign in its currency and does not undertake obligations in terms where it is not sovereign and therefore could get squeezed.
So from the MMT perspective, concern over the affordability of the national debt is a canard that distracts from the issues that are actually important for policy. Neither fiscal payments by the Treasury nor monetary payments like interest on excess reserves are constraints on the government to spend. According to MMT, the real constraint is availability of real resources and the nominal constraint is inflation. "Affordability" is not an issue for a currency sovereign as the monopoly issuer of its currency as the unit of account in the currency zone.
The classic MMT paper on this issue is "Interest Rates and Fiscal Sustainability" by Scott T. Fullwiler (2006).
FRED Blog
How expensive is it to service the national debt? : A battle between interest rates and growth rates